F&I Management & Training

Future advice revealed

Dealers and carmakers are considering how to administer the scrappage scheme across the UK after further information about how the Government-backed scrappage scheme was revealed.

AM has learned that there was concern among some volume carmakers that scrappage must apply to all vehicles in their ranges, including their least profitable entry-priced small cars.

However, the Department of Business Enterprise and Regulatory Reform (BERR) insists that carmakers taking part must apply the scheme to all models and derivatives. Those that don’t wish to, should not join.

Dealers have asked for clarification on administrative work required at point of sale and how quickly the Government’s share of the discount will be paid.The Government is giving £1,000 towards the cost with another £1,000 coming from the participating manufacturer.

Dealers will be required to check the old car qualifies for the scheme, and keep copies of the registration document, MoT certificate, certificate of destruction and invoice showing the £2,000 deduction.

A meeting on Monday between BERR and industry representatives, including the SMMT and RMIF, clarified many points but left some carmakers still undecided whether to join in.

Manufacturers should now have the finalised terms and conditions of scrappage.  Paul Everitt, SMMT chief executive, expects manufacturers to have decided whether to sign the contract by mid-May.

“This is good news for consumers that our industry is trying to make this as successful as possible.

“Everybody wants to provide the consumer with the best possible array of vehicles,” Everitt said.

The Government will pay the manufacturer within 10 days of the new vehicle being delivered and the old one scrapped. The manufacturer will then pay the dealer within another 10 days.

A manufacturer source told AM: “The Government understands the concerns about speed of payment. It doesn’t want this to be bogged down with administration.

"One reason that scrappage won’t apply to nearly new cars is because the Government offered to deal with 32 manufacturers rather than thousands of dealers.”

The source said BERR was unable to clarify the exact process for scrapping the old cars, or whether its £1,000 contribution was inclusive or exclusive of VAT.

In what was described as a “fairly involved meeting” of around 60 participants, BERR was questioned on the scheme’s requirement for the scrapped vehicle to have a valid MoT certificate.

“It was put to them that what if an owner has their car MoT’d, it fails and needs £400 of repairs to get through, they decide it’s not worth the work so decide to scrap it. Shouldn’t they be able to use the scrappage scheme?

“BERR’s response was that it did not want to take the repair business away from repairers. What they were effectively saying was that the owner must pay for the repairs and then scrap the car through scrappage,” said the source.

However, BERR is expected to allow a period of grace of around three months from when the customer places the order for a new car if the MoT on their old car ends during the interim period.

Key facts for dealer principals

• Scrappage scheme starts May 18, 2009, and ends once Government funding runs out or February 28, 2010, whichever is sooner.
• Minimum £2,000 discount must be applied on qualifying purchases if your manufacturer is participating.
• Discount applies only to purchases of any unregistered car or LCV (up to and including 3.5 tonnes) from participating manufacturers.
• Customers can include retail buyers, business users and small fleets.
• Dealers and manufacturers can voluntarily offer further discount on top from trading margin.
• Trade-in car or LCV must have been registered before August 31, 1999.
• Trade-in must have valid VED disc and MoT certificate, or SORN notification.
• Trade-in must have been registered in the UK to the customer for 12 months and the new car must be registered to the same person.
• Trade-in must be collected by the manufacturer’s authorised treatment facility and scrapped.
• Dealer must keep copies of registration document, MoT certificate and certificate of destruction of old car, and copy of invoice for the new car showing the £2,000
• reduction.
• The Government’s payment will be made within 10 days of the completed scrappage process to the manufacturer, who will pay the dealer within another 10 days.

The Government has agreed to provide a £5 million bridging loan to help push through LDV’s sale to Malaysian company Weststar.

Ian Pearson, business minister, said: “Weststar's proposed purchase of LDV offers the only credible chance of keeping this manufacturing plant in the UK.

"While completion of the deal is not certain, it would have been irresponsible of the Government not to support it going forward. But this is a one-off bridging loan and it cannot be extended."

Weststar was already working with LDV in an export deal which started two years ago, which saw the Malaysian company recieve LDV vans in kit form. The £5m from the Government now gives Weststar more time to get financing through to finalise the deal to purchase LDV.

Westar's plans for LDV are believed to include £50 million of investment, keeping production in Birmingham and doubling production output in the medium term by exporting more vans to Malaysia.

LDV applied for administration on April 29 after its initial attempts to negotiate a sale fell through. The news of a possible sale has given hope to dealers in the LDV network that the franchise could continue into the future and outstanding payments for warranty work will be paid.

DATED: 06.05.09

FEED: AM

Plans for Fiat to take over General Motor’s European business are moving forward after its chief executive Sergio Marchionne met Germany’s economy minister.

Karl-Theodor zu Guttenberg said the Italian carmaker wanted to take over Opel, but without running up any debt, reported BBC News.

But Canadian car parts supplier Magna International said it was also in talks with GM and German government officials about possibly taking a minority stake in Opel.

Zu Guttenberg said, after meeting Marchionne, that any deal would need short-term financing across Europe by the Italian carmaker of about 5-7bn euros (£4.45-6.24bn).

UK union opposes move

UK's Unite union said it opposed Vauxhall being taken over by Fiat - claiming it would be an "unmitigated disaster" that would cost jobs.

Professor Garel Rhys from the Cardiff Business School agreed that British jobs could be lost if the deal went ahead. 
"General Motors has indicated they have three plants too many and those three plants too many are actually in Germany, or run by the Germans", he said."It could be that Fiat, knowing that the company is too big, would balk at taking on the Germans and might look for the softer option of closing a plant in the UK." 

DATED: 05.05.09

FEED: AM

Chrysler has been given approval from the US bankruptcy court to access a $4.5bn state loan as it secures its planned alliance with Fiat.

However a group of investment funds yesterday attempted to block its plans with Fiat. The dissenting lenders, led by Oppenheimer Funds and Stairway Capital, argued in a New York bankruptcy court that the sale proposal was "orchestrated entirely by the U.S. Treasury and foisted upon the debtors."

Chrysler asked the court to schedule a hearing as soon as May 21 to allow it to sell its best assets into a new company owned by its unions, Fiat and the US Government.

DATED: 05.05.09

FEED: AM

Pendragon has revealed that it lost £200 million before tax in the year up to December 31, 2008 in comparison to a £46.5 million profit in 2007.

The dealer group  posted an operating loss of £136.1m in 2008 compared to an operating profit of £105.8m in 2007.

Revenues were also hit, falling to £4.2 billion in 2008 in comparison to £5.1 billion in 2007.

Cash generated from operations was down to £53.6m in 2008 compared to £160m in 2007.

The company has also taken £60m of cost out of the business.

Trevor Finn, Pendragon chief executive, said: “In 2008 the Group faced the most severe market conditions since the early nineties.

“However management reacted quickly and decisively, reducing costs and closing dealerships no longer viable, and better positioning the group for the difficult conditions.

“More recently, we have renegotiated a new three year borrowing facility which gives us the necessary headroom to work through what we continue to expect to be continued difficult trading conditions."

The group closed or sold 53 dealerships in 2008 and is looking to close seven more before the end of 2009. Overall, 3,712 roles were made redundant in 2008.Pendragon has said its banking covenants are now at levels which give the group flexibility for the next three years.

In its financial statement, Pendragonsaid: "We anticipate a stabilisation in the used car market this year which is a key area for us going forward.

“We expect the new car market to remain subdued for the next 12 months and then we believe a gradual improvement will be seen. The group is now well placed to take advantage of markets when they recover and is currently trading in line with our expectations.”

Pendragon's prestige Stratstone division saw an operating loss of £2.5m in 2008 in comparison to a £32.3m in 2007. Its Evans Halshaw volume division made a £6.1m operating profit, compared to £35.6m in 2007.

The Pendragon share price has been gaining strength since the start of the year and is now at 21.75p.

DATED: 05.05.09

FEED: AM